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Buying A House In These States Can Get Your Student Debt Wiped Out

In the past, 100% interest loans and down payment assistance provided first-time homebuyers with the means to own their own homes faster and more affordably. These programs still exist in some areas, but not much attention has been paid to university and college graduates with large amounts of student debt.

Some states are looking to lure new home buyers with more incentive programs at today’s lower-than-ever interest rates. One way they address the need to get these tertiary education graduates into homes they can afford is by helping them pay off their student loans.

Photo: Hoffman


Maryland offers a SmartBuy program for homebuyers looking to buy a home in their state. This SmartBuy program will take care of up to 15% of the purchase price, capped at a maximum of $30,000.

The student debt must be pre-existing, over $1,000, and paid off as part of the home’s purchase. Buyers must also meet all of the program’s eligibility requirements. The state provides a list of approved SmartBuy lenders who can verify eligibility and walk homebuyers through the process from start to finish.


A similar SmartBuy program is offered in Illinois by state-approved lenders. In addition to $5,000 for closing costs or a down payment, the program offers student loan relief at 15% of the purchase price up to $40,000. Like Maryland, the buyer must pay off the student debt in its entirety at the time of home purchase. If the 15% is insufficient to do this, buyers must cover the difference at closing.

Income guidelines and purchase-price limits are based on the county where the new home is located. SmartBuy can only be applied to a primary residence—where the buyer will live—and it must be a new purchase.

The state also maintains consumer credit risk accountability by limiting the program to buyers with a FICO mid-score of at least 640. Buyers can check their credit score for free from each of the three bureaus from one of several reputable companies. The mid-score is the one that is neither the lowest nor the highest of the three.



Some homebuyers may be eligible for down payment assistance in Kansas if they meet the program’s guidelines. These guidelines include being a first-time homebuyer (or not owning a home for three years) and having a median income at or below 80% for their area. Eligible homebuyers are required to put up at least 2% to no more than 10% of the sale price on their own. The program then offers a 0%-interest loan for 15 to 20% of the purchase price, forgiven after ten years of residency in the home.

The Kansas State Loan Repayment Program offers eligible professionals in health care fields the opportunity to receive student loan repayment in exchange for service commitments in rural areas. With a minimum commitment of two years, those eligible can receive annual lump-sum payments up to $20,000 (up to $25,000 for physicians and dentists). After the initial service agreement, they can apply to continue their contracts annually for up to five years. Loans must be currently active and not in default to qualify.



Eligible homebuyers in Texas may qualify for state program assistance through qualified lenders.  Texas homebuyers with low-to-moderate income can apply for Homes Sweet Texas Home Loan Program. This program offers 30-year fixed-rate loans and down payment assistance up to 5% of the loan amount.

First responders, teachers (and some other school personnel), and veterans may qualify for the Homes for Texas Heroes Home Loan Program. Likewise, this program offers 30-year fixed-rate loans and down payment assistance up to 5% of the loan amount. However, the down payment assistance may be awarded as a grant that does not have to be repaid or as a second lien loan that is forgivable after three years of residency in the new home.

Photo: Mallorca

Don’t Fret

With millions of Americans owing trillions of student loan debt, it may seem impossible to save enough to buy a home.  If your preferred state of residence isn’t listed here, check the state government websites for the availability of similar programs.